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Cooper Companies (COO) Earnings Miss & Revenues Beat in Q4

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The Cooper Companies, Inc. (COO - Free Report) reported fourth-quarter fiscal 2018 earnings of $2.87 per share, missing the Zacks Consensus Estimate by 3%. However, earnings increased 8.3% on a year-over-year basis.

The California-based specialty medical device company reported revenues worth $651.5 million, surpassing the Zacks Consensus Estimate of $645.8 million. On a year-over-year basis, revenues improved 16%.

In a year’s time, Cooper’s shares have rallied 16% compared with the industry’s 0.6% and the S&P 500 index’s 2.2%.

The stock currently carries a Zacks Rank #3 (Hold).

FY18 at a Glance

On a full-year basis, Cooper’s revenues totaled $2.53 billion, in line with the Zacks Consensus Estimate and up 18.4% from fiscal 2017.

Adjusted earnings per share for fiscal 2018 was $11.50, missing the Zacks Consensus Estimate by 0.9%. Earnings however, rose 18.6% from the previous fiscal.

Cooper reports revenues through two major segments — CooperVision (CVI) and CooperSurgical (CSI).

CVI revenues (74.3% of net sales) came in at $1.88 billion, up 12% from fiscal 2017 and 8% on pro forma basis. CSI revenues (25.7% of net sales) grossed $650.8 million, up 40% from the previous fiscal and 8% on a pro forma basis.

The Cooper Companies, Inc. Price, Consensus and EPS Surprise

 

The Cooper Companies, Inc. Price, Consensus and EPS Surprise | The Cooper Companies, Inc. Quote

Q4 Segment Details

CVI

This segment garnered revenues worth $480.6 million, up 10% on a pro forma basis and 9% year over year. Per management, the segment saw a noticeable uptick in the daily silicone hydrogel lenses, showing pro forma growth of 50% driven by accelerating growth in both Clariti and MyDay.

Toric (31% of CVI) revenues totaled $149.2 million, up 11% on a pro forma basis and 10% year over year. Multifocal (10%) generated revenues worth $47.8 million, up 7% at pro forma and 6% year over year.

Single-use sphere (29%) posted revenues worth $141.7 million, which shot up 21% at pro forma and 19% from a year ago. Non single-use sphere (30%) revenues came in at $141.9 million, up 2% at pro forma and 2% from a year ago.

Geographically, the segment saw an improvement in U.S. revenues (39%), up 8% at pro forma and 8% year over year to $185.8 million. EMEA revenues (38%) were $183.8 million, up 9% at pro forma and 6% from the prior-year quarter. Per management, overseas growth was driven by clariti and MyDay strength and strong results from Biofinity and Avaira Vitality.

Asia Pacific sales (23%) rose 19% at pro forma and 19% year over year to $111 million. Per management, APAC posted strong results buoyed by Clariti along with strength in MyDay and Biofinity.

CSI

This segment posted revenues of $170.9 million, up 5% at pro forma and 40% year over year. Per management, growth was led by a 20% rise in PARAGARD.

Sub-segment Office and Surgical products (64% of CSI) accounted for $110 million, up 12% at pro forma and a whopping 97% on a year-over-year basis. Fertility (36%) posted sales worth $60.9 million, down9% year over year and 6% at pro forma.

Margin Analysis

In the fiscal fourth quarter, gross profit totaled $430 million, up 21.7% year over year.  Per management, adjusted gross margin was 66%, flat with the year-ago quarter. As a percentage of revenues, adjusted gross margin at the CSI segment was 73%, up from 60% a year ago. Per management, the upside was driven by the addition of PARAGARD and improvement in product mix. As a percentage of revenues, adjusted gross margin at the CVI segment was 64% compared with 68% in the year-ago quarter.

Operating income in the quarter totaled $122.7 million, up 13.1% year over year. Adjusted operating margin was 24.3%, up 180 bps from the prior-year quarter. Per management adjusted operating margin was 27%, flat with the year-ago quarter.

Financial Condition

Cooper Companies exited the fiscal fourth quarter with a free cash flow of $193.2 million, up 16% year over year.

The company’s debt fell to $2.02 billion primarily due to paydown from operational cash flow generation.

FY19 Guidance

Cooper Companies expects fiscal 2019 revenues within $2,600-$2,660 million. The Zacks Consensus Estimate is pegged at $2.67 billion, above the projected range.

Notably, revenues from CVI are expected between $1,940 million and $1,980 million, while the same from CSI are anticipated within $660-$680 million.

The company also expects adjusted earnings per share between $11.30 and $11.70. The Zacks Consensus Estimate is pinned at $12.12, above the guided range.

Wrapping Up

Cooper Companies exited the fiscal fourth quarter on a tepid note. While revenues beat estimates, earnings missed the same. However, the company saw solid gains from its core CVI unit, which performed impressively in the United States, EMEA and Asia Pacific. Cooper Companies continues to gain from the PARAGARD acquisition, which has consistently driven CSI. Management is also optimistic about the clarity, MyDay and Biofinity suite of products which have seen a solid quarter. The company’s portfolio of daily silicone hydrogel lenses makes it one of the stalwarts in the soft contact lens market. In the quarter, the company paid down debt significantly.

On the flip side, Fertility sales were soft in the quarter owing to channel inventory contraction. The genomics business also declined in the quarter. Gross margin at CVI unit was below management’s expectations. The company’s guidance for fiscal 2019 was weak as well. Foreign exchange volatility persists. Moreover, a series of acquisitions pose significant integration risks. Stiff competition in the niche space adds to the woes.

Earnings of MedTech Majors at a Glance

A few top-ranked stocks in the broader medical space which delivered robust earnings this season are Genomic Health, Inc. (GHDX - Free Report) , Illumina, Inc. (ILMN - Free Report) and Hill-Rom Holdings Inc. (HRC - Free Report) .

Genomic Health sports a Zacks Rank #1 (Strong Buy) while Illumina and Hill-Rom carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Genomic Health reported adjusted earnings per share of 35 cents in the third quarter of 2018, which outpaced the Zacks Consensus Estimate of 7 cents.

Illumina reported adjusted earnings per share of $1.52, which surpassed the consensus mark by 21.6%.

Hill-Rom Holdings posted adjusted earnings per share of $1.63 in fourth-quarter fiscal 2018, which exceeded the Zacks Consensus Estimate by 7.9%.

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